The President Ram Nath Kovind on Friday promulgated an ordinance to amend the Insolvency and Bankruptcy Code (IBC) to stop fresh insolvency proceedings due to defaults because of the COVID19.
There will not be initiation of corporate insolvency resolution process of a corporate debtor filed for any default arising on or after 25th March, 2020 for a period of six months, not exceeding one year from such date, according to the ordinance.
The Amendment has added Section 10 A. which states, Notwithstanding anything contained in Section 7, 9, and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of Six months or such further period, not exceeding one year from such date, as may be notified in this behalf:
Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of corporate debtor for the said default occurring during the said period.
The Amendment of Section 66 was also made according to which after sub section (2), the following sub-section will be inserted, namely; –
(3) Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under sub-section (2), in respect of such default against which initiation of corporate insolvency resolution process is suspended as per section 10A”.
It was said that the entire ecosystem for implementation of the Insolvency and Bankruptcy Code, 2016 is in place and provisions relating to corporate insolvency resolution process and liquidation process for corporate persons under the Code are in operation, whereas COVID-19 pandemic has impactedbusiness, financial markets and economy all over the world, including India and created uncertainty and stress for business for reasons beyond their control, whereas a nationwide lockdown is in force since 25th March, 2020 to combat the spread of COVID-19 which has added to disruption of normal business operations.
“Whereas, it is difficult to find adequate number of resolution applicants to rescue the corporate person who may default in discharge of their debt obligation, and whereas it is considered expedient to suspend under section 7,9 and 10 of the Insolvency and Bankruptcy Code, 2016 to prevent corporate persons which are experiencing distress on accountof unprecedented situation, being pushed into insolvency proceedings under the said Code for some time.
Whereas, it is considered expedient to exclude the defaults arising on account of unprecedented situation for the purposes of Insolvency proceedings under this Code, whereas the parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action”, said in the notification.
-India Legal Bureau